Appeals Court Revives Tesla’s Challenge Against Louisiana Law Banning Direct Sales

NEW ORLEANS (AP) — Tesla’s federal court challenge to a Louisiana law that prohibits automobile manufacturers from selling directly to consumers has been revived by an appeals court.

The lawsuit by the electric car company owned by billionaire Elon Musk is part of a broader effort in multiple states to circumvent laws that bar vehicle manufacturers from also being retailers. The effort includes court challenges and, in some cases, opening showrooms on sovereign Native American tribal properties where state laws don’t apply.

The 5th U.S. Circuit Court of Appeals, in a 2-1 ruling, reversed a lower court ruling dismissing a Tesla claim that it was being denied constitutional due process of law. The appeals court said Tesla had made a plausible claim that the Louisiana Motor Vehicle Commission, which governs car sales in the state, was biased against Tesla, noting that it’s dominated by licensed third-party dealers.

“The Commission will always be incentivized to exclude new business models from entering the market,” Judge Jerry Smith wrote for the majority in the ruling issued Monday.

The ruling sends the case back to the federal district court in New Orleans.

Smith was appointed to the court by former Republican President Ronald Reagan. Judge Catharina Haynes, appointed by former Republican President George W. Bush agreed with the result. Dissenting was Judge Dana Douglas, appointed by Democratic President Joe Biden.

“The Supreme Court has clarified that regulatory boards are not unconstitutional merely because they are composed of competitors of the entities they regulate,” Douglas wrote.